Singh v. Uber Techs. Inc., 17-1397

• Citation: 939 F.3d 210
• Decision Date: 11 September 2019
• Docket Number: No. 17-1397,17-1397
• Parties: Jaswinder SINGH, on behalf of himself and all those similarly situated, v. UBER TECHNOLOGIES INC., Jaswinder Singh, Appellant
• Court: United States Courts of Appeals. United States Court of Appeals (3rd Circuit)

939 F.3d 210

Jaswinder SINGH, on behalf of himself and all those similarly situated,

v.UBER TECHNOLOGIES INC., Jaswinder Singh, Appellant

No. 17-1397

United States Court of Appeals, Third Circuit.

Argued April 26, 2019

Filed: September 11, 2019

OPINION OF THE COURT

GREENAWAY, JR., Circuit Judge.

Arbitration agreements are essentially contracts that predetermine that a dispute between parties will be decided by an arbitrator, rather than in court. In response to judicial hostility toward these types of contracts, Congress passed the Federal Arbitration Act ("FAA"), 9 U.S.C. §§ 1 – 16. The FAA places certain arbitration agreements on equal footing with all other contracts by requiring courts to enforce such agreements according to their terms. Section 2 provides that the FAA covers "a written provision in any maritime transaction or a contract evidencing a transaction involving commerce," id. § 2, but a provision in § 1 sets an outer limit, providing that "nothing" in the FAA "shall apply to contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce," id. § 1 (" § 1"). This outer limit sets the stage for the case before us.

Jaswinder Singh brought this putative class action in the Superior Court of New Jersey, Monmouth County, on behalf of himself, and other similarly situated New Jersey Uber drivers. He alleged that Uber Technologies, Inc. ("Uber") misclassified them as independent contractors as opposed to employees, which resulted in their being deprived of overtime compensation, and having to incur business expenses for the benefit of Uber. Uber removed the case to federal court in the District of New Jersey. It then moved for the District Court to dismiss the case and compel Singh to have it decided by an arbitrator, on the basis of an agreement to arbitrate. Singh opposed the motion to compel arbitration on numerous grounds, one of which was that the District Court did not have the authority to compel arbitration under the FAA. He argued that, to the extent that he had an agreement with Uber, it fell within the ambit of the residual clause—the "any other class of workers" portion—of § 1. In the least, Singh asked that he be given the opportunity for discovery on the essential § 1 residual clause inquiry, which is whether the class of workers to which Singh belongs is "engaged in foreign or interstate commerce." Id.

The District Court granted the motion over Singh’s objections. But it did not reach the engaged-in-interstate commerce inquiry. Instead, the Court ruled that Singh did not fall within the ambit of the residual clause of § 1 because that clause only extends to transportation workers who transport goods, not those who transport passengers. We disagree with this reading. Consistent with our longstanding precedent, we hold that the residual clause of § 1 may extend to a class of transportation workers who transport passengers, so long as they are engaged in interstate commerce or in work so closely related thereto as to be in practical effect part of it. We will therefore vacate the District Court’s order compelling arbitration. In addition, because neither the Complaint nor incorporated documents suffice to resolve the engaged-in-interstate-commerce inquiry, we will remand this and the remaining issues to the District Court for further proceedings consistent with this opinion.

I. BACKGROUND

A. Legal

The FAA "place[s] arbitration agreements on equal footing with all other contracts" by requiring courts to "enforce [such] agreements according to their terms." MacDonald v. CashCall, Inc. , 883 F.3d 220, 226 (3d Cir. 2018) (first alteration in original) (citations omitted). So the statute provides that, like any other contract, arbitration agreements may be rendered unenforceable by grounds that exist at law or in equity for revocation. See id. ; 9 U.S.C. § 2. To the extent that a particular ground implicates the threshold question of whether the parties are bound by an agreement to arbitrate, it is referred to as a gateway question of arbitrability and is typically resolved in court. Howsam v. Dean Witter Reynolds, Inc. , 537 U.S. 79, 84, 123 S.Ct. 588, 154 L.Ed.2d 491 (2002) ; Chesapeake Appalachia, LLC v. Scout Petroleum, LLC , 809 F.3d 746, 756 (3d Cir. 2016).

Although this is the typical route, the parties may contract around it, and agree to have even these questions decided by an arbitrator. To do so, the arbitration agreement need only include a clause—a delegation clause—that reserves arbitrability questions for an arbitrator to decide. Rent-A-Center, West, Inc. v. Jackson , 561 U.S. 63, 70, 72, 130 S.Ct. 2772, 177 L.Ed.2d 403 (2010) (" Rent-A-Center "). Where such a clause is included, courts cannot decide threshold questions of arbitrability "unless a party challenge[s] the delegation clause [specifically] and the court concludes that the delegation clause is not enforceable." MacDonald , 883 F.3d at 226 (citations omitted). The rationale is that a delegation clause is severable from the underlying arbitration agreement such that it is separately entitled to FAA-treatment—that is, unless specifically (and successfully) challenged, the clause is in and of itself treated as a valid contract that must be enforced under the FAA’s enforcement provisions. See Rent-A-Center , 561 U.S. at 72, 130 S.Ct. 2772.

All of this, of course, assumes that the FAA controls. But what if it does not? Or, more precisely, who gets to decide the question of whether the FAA applies where there is a delegation clause? During the pendency of this appeal, the Supreme Court answered this question, holding that courts must be the ones to determine whether an agreement is excluded from FAA coverage even where there is a delegation clause. New Prime Inc. v. Oliveira , ––– U.S. ––––, 139 S. Ct. 532, 538, 202 L.Ed.2d 536 (2019).

Specifically, §§ 1 and 2 of the FAA identify the subset of arbitration agreements covered by the statute. Since they come before the FAA’s enforcement clauses under §§ 3 and 4—which authorize a court to stay a proceeding and compel arbitration—the Supreme Court reasoned that §§ 3 and 4 cannot apply to an arbitration agreement that is excluded from the FAA’s coverage by the terms of §§ 1 and 2. Id. at 537–38. Pursuant to the rationale offered by Rent-A-Center , the Court viewed a delegation clause as "merely a specialized type of arbitration agreement," and, as a result, held that the same reasoning applied. Id. at 538.

This background sets the stage for our case: the contract between the parties contains an arbitration provision and a delegation clause. If the contract is covered by the FAA, these provisions might combine to require the parties to have much of their dispute resolved by an arbitrator. However, the parties disagree over whether their contract is excluded from the FAA under the residual clause of § 1.

B. Procedural

1. Proceedings in the District Court

Singh brought this putative class action in the Superior Court of New Jersey, Monmouth County, on behalf of himself and other similarly situated New Jersey Uber drivers. He alleged that Uber misclassified them as independent contractors as opposed to employees, and that, as a result, Uber deprived them of overtime compensation, and required them to incur business expenses for the benefit of Uber. Uber removed the action to federal court in the District of New Jersey. It then moved to dismiss the action and compel arbitration pursuant to the arbitration provision of an agreement between the parties called the Rasier Software Sublicense Agreement ("Rasier Agreement").

In response to the motion, Singh argued that there was no valid agreement between Uber and him, and, even if there was, he was not bound by its arbitration provision for four reasons: (1) Uber failed to meet its burden to show that the provision was a constitutional waiver of the Seventh Amendment right to a jury trial; (2) the provision is excluded under the residual clause of § 1 of the FAA; (3) the provision violated the National Labor Relations Act ("NLRA"), the Norris-LaGuardia Act, and the New Jersey Wage and Hour Law ("NJWHL"); and (4) the provision was unconscionable.

As to the residual clause of § 1 of the FAA specifically, Singh argued that he had at least put forth enough to warrant discovery on the question. He relied on our decision in Guidotti v. Legal Helpers Debt Resolution, L.L.C. , 716 F.3d 764 (3d Cir. 2013), to support this argument. There, we recognized that our precedents suggested two possible standards under which a motion to compel arbitration could be decided—the motion to dismiss standard or the summary judgment standard. Id. at 771–72. The two differ significantly, as we accept as true the facts established by the pleadings—the complaint and incorporated documents—when deciding the former, but, for the latter, we require the party opposing the motion to submit evidence, which is typically obtained through discovery. See id. at 772 (citing Fed. R. Civ. P. 56(c)(1)(A) ).

We held that the motion to dismiss standard applies to a motion to compel arbitration where a party’s claims are "subject to an enforceable arbitration clause"—that is, where the existence of a valid agreement to arbitrate between the parties is apparent from the face of the complaint or incorporated documents. Id. at 774, 776. "But if the complaint and its supporting documents are unclear" as to whether the parties agreed to arbitrate, "or if the plaintiff has responded to a motion to compel arbitration with additional facts sufficient to place the agreement" in dispute, a "restricted inquiry into factual issues [is] necessary ...." Id. at 774–75 (emphases added) (internal quotation marks and citations omitted). The motion to compel arbitration is judged under a summary judgment standard if it is renewed after this inquiry. Id. at 775.

Uber asked the Court to reject this request for discovery on the grounds that the residual...